A cynical commentary about developments in the South African financial markets and the incomprehensible activities and pronouncements of bureaucrats and politicians.

Friday, 18 March 2016

WITH GOVERNMENT FINANCIAL SUPPORT EVEN PIGS CAN FLY

The result
reporting season for January year-end companies is drawing to a close and the
average earnings decline for members of the All Share index is 7%. Nevertheless,
the index itself has soared by about 15% since the January low, with the simple
mathematical consequence of pushing the pe ratio (for historical earnings) of
the 100 biggest cap shares to around 35. This level suggests that buyers ought
not to be allowed out unsupervised. Shares purchased with these valuations are unlikely
to deliver satisfactory returns over the next few years. But as always there
must be situations worth looking at now that the commodity prices may have
bottomed out. But do wait until the ratings “shock” is over.

Reserve Bank Governor
Kganyago is clearly much taken with that big lever in the corner of his fancy
office. Yesterday he gave it another tug, raising the repo rate to 7%. So the commercial
banks now expect their prime rate borrowers to pay them 10.25% and this will
cascade down and make life even harder for the majority of our citizens who are
alarmingly in debt and assuredly paying even higher rates.

Beleaguered
presidents, politicians and premiers world-wide are surely watching with envy
and astonishment the way in which our Number 1 is dealing with the waves of
unfavourable criticism about his friends, family and regime. His perfectly
timed giggle and dismissive denouncement of all accusations as nonsense is
masterful. He knows nothing about these ludicrous claims and questioners are
told to seek answers elsewhere. Students of the political landscape deem it impossible
for our young democracy to bear these insults anymore and assure us that Zuma
will soon either be replaced or brought to heel by disgruntled party elders. Let’s
see. Unfortunately, though, an indisputable and respected replacement candidate
is not in sight.

It won’t have
taken long for the ratings people, who are in town for an assessment, to reach
a conclusion. One astonished peek at the Gupta Guest Book was all they would
have needed before snapping closed their laptops and heading off to the beach
bar for a ridiculously cheap beer.

There is
really something rather quaint about the hopelessly insolvent national airline forecasting
that it will make a profit soon. This prediction does, however, come with the
warning that this miraculous outcome is dependent on SAA “obtaining more financial
support from government”. Well there’s a great plan for any struggling
business. Just get the taxpayers to send round a truck load of the folding
stuff and voila! Profits. Well, executive bonuses at least.

An
engineering research team have proposed fitting minibus taxis with an ear-splitting
alarm triggered when the vehicle exceeds the speed limit. This, they claim,
would help reduce road accidents. Did their field work not notice that taxis
are already filled with a deafening cacophony to which the addition of a klaxon
would only further alarm the other drivers on the road? In fact, when the great
“taxi recapitalisation” project was launched about a decade ago, the design
specifications for the new vehicles included seatbelts for all passengers and a
speed limiting governor. Neither modification seems to have caught on. Ruthless
and indiscriminate enforcement of existing traffic laws is what is needed to
bring our terrible road carnage under control. Not more noise.

The National
Nuclear Regulator is not quite the expected efficient and ruthless overseer of
things that could harm us. This week they received applications from Eskom for
licences to build and operate two nuclear power stations. NNR are expected to take
around two years to give an answer! And only then might building begin. Which
shows that the scurrilous rumours about our president (and his friends)
arranging construction and operating contracts for personal gain can’t be true.

My phone’s
calendar is overflowing with sports events to supervise this weekend starting
this evening. There have already been some unexpected (suspicious?) results at
the World T20 tournament in India. I wonder if $10m is still the going rate to
take care of a sporting result?